US Crude Slumps As Oil Rig Count Hits Six-Week High

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Crude oil futures are posting tepid losses on Friday as prices are poised for a sizable weekly loss. US crude has had a rough September, primarily on demand woes and concerns of a global supply glut. With uncertainty surrounding the coronavirus pandemic, as well as a strengthening US dollar, could oil’s rally come to a screeching halt?

November West Texas Intermediate (WTI) crude futures dipped $0.02, or 0.05%, to $40.29 per barrel at 18:20 GMT on Friday on the New York Mercantile Exchange. US crude will settle the week down 1.7%, adding to its year-to-date decline of more than 34%. So far this month, oil has declined more than 6%.

Brent, the international benchmark for oil prices, is also in the red to finish the trading week. December Brent crude futures shed $0.02, or 0.05%, to $42.44 a barrel on London’s ICE Futures exchange. Brent will suffer a 1.4% loss for the week, bringing its YTD slide to just below 36%.

US crude oil rigs came in at 183 in the week ending September 25, up from 179 in the previous week, according to Baker Hughes. This is the highest total since the end of August. The total rig count jumped from 255 to 261.

Like other dollar-denominated commodities, the greenback is putting pressure on WTI contracts. The US Dollar Index, which measures the greenback against a basket of currencies, advanced 0.28% to 94.62 on Friday, lifting its weekly gain to about 1.9%. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.

Meanwhile, a lack of additional US stimulus is affecting oil and the broader financial market. The Democrats are putting together a $2.2 trillion stimulus and relief package that could be voted on as early as next week. Many analysts are optimistic because the bill contains plenty of bipartisan measures, such as direct payments, expansion of the Paycheck Protection Program (PPP), and a renewal of aid for several industries.

Overall, lackluster demand – at home and abroad – continues to affect the energy sector. Stephen Brennock of oil broker PVM, summarized the state of markets in an interview with CNBC:

Rising virus infections, renewed lockdowns, slowing economic recovery and stalled U.S. stimulus talks have put the brakes on the fragile revival in fuel demand.

When you factor in oil-producing countries restarting operations, the global crude markets could witness another steep slide in prices.

In other energy markets, November natural gas futures plunged $0.077, or 2.66%, to $2.822 per million British thermal units (btu). October gasoline futures picked up $0.0154, or 1.31%, to $1.1886 per gallon. October heating oil futures added $0.0062, or 0.55%, to $1.1326 a gallon.

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